South Korea’s won fell to a five-month low as overseas investors pulled money from local stocks after the central bank left interest rates unchanged. Government bonds declined.
The currency dropped by the most in six weeks after global funds cut their holdings of shares included in the Kospi Index by 182 billion won ($164 million) today, exchange data show. The Bank of Korea kept its benchmark seven-day repurchase rate at 2.75 percent for a fifth month today in a decision predicted by 12 of 16 analysts surveyed by Bloomberg. Four forecast a cut of 25 basis points, after similar moves in July and October
“We expect the BOK to reduce interest rates in April when it is likely to revise down its growth forecast,” said Ryan Oh, a fixed-income analyst at Samsung Securities Co. in Seoul. “The minutes of today’s meeting will be very important in judging the direction of rates as they show how many board members held a different view to today’s decision.”
The won fell 1.1 percent to 1,109.11 per dollar, according to data compiled by Bloomberg. It touched 1,110.61, the weakest level since Oct. 15. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose 94 basis points, or 0.94 percentage point, to 9 percent.
Today’s decision to leave rates unchanged was “not unanimous,” Governor Kim said at a briefing today. Finance Minister nominee Hyun Oh Seok told lawmakers yesterday that “short-term policy support” is needed for the economy and that the country needs to be “cautious” about introducing any taxes on foreign-exchange transactions as imposing levies on trading may hamper capital inflows.
The yield on the 2.75 percent bonds due December 2015 rose three basis points to 2.63 percent, according to prices from Korea Exchange Inc.
President Park Geun Hye, who took office on Feb. 25, is grappling with North Korean tensions, yen weakness that aids export rivals in Japan, and a drag on consumption from elevated household debt.